Pulse Seismic Inc. press release
Pulse Data Inc. reports 2005 results and confirms the previously announced 50% increase in the annual dividend rate
TSX - Toronto Stock Exchange ยท Canada
TSX Symbol - PSD
CALGARY, March 14 /CNW/ - Mr. Ken MacDonald, President and Chief Executive Officer of Pulse Data Inc. ("Pulse" or the "Company") reports the financial and operating results of Pulse for the year ended December 31, 2005. Mr. MacDonald is also pleased to announce that Pulse has declared its eleventh consecutive quarterly dividend. This dividend is $0.0375 per common share and will be paid on April 14, 2006 to shareholders of record at the close of business on March 31, 2006. This dividend represents a 50% increase in the annual dividend rate to $0.15 per common share, as previously announced in its news release on February 14, 2006. The Company's Dividend Reinvestment Plan for eligible shareholders will be available for this dividend. A conference call to review the 2005 year end results has been scheduled for 1:00 pm ET (11:00 am MT) on Wednesday March 15, 2006. The conference call dial in number is (416) 644-3418 (Toronto) and 1-800-814-4941. A live webcast will be accessible at: http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID(equal sign)1390400.
HIGHLIGHTS
Free cash flow(1) for the year ended December 31, 2005 was $23.5 million, compared to $12.0 million in 2004.
Based on the Company's current share price, the dividend noted above represents an approximate yield of 5.3%.
Seismic data library sales increased by 36% to a record level of $34.9 million for the year ended December 31, 2005 compared to $25.7 million for the year ended December 31, 2004.
Pulse had a working capital position of $17.0 million at December 31, 2005 compared to a working capital position of $3.8 million at December 31, 2004.
Pulse repaid $5.5 million of long-term debt during 2005, and restructured its long-term debt facility with its principal lenders to include an additional $15.4 million which was used to purchase a significant data set in June 2005.
Pulse added 2,914 net square kilometres of 3D seismic to its data library during 2005 through the purchase of a significant seismic data set in June 2005 (approximately 2,500 net square kilometres of 3D data) and through four participation surveys (418 net square kilometres of 3D data), compared to the addition of 1,100 net square kilometres of 3D data through seven participation surveys in 2004.
LiDAR segment revenue for 2005 was $8.5 million, a 118% increase over $3.9 million recorded for the period May 26, 2004 to December 31, 2004. However, the LiDAR business segment loss before income taxes increased to $3.4 million in 2005.
<< Financial Highlights ($000s except per share data) 3 months ended Year ended December 31 December 31 2005 2004 2005 2004 (unaudited) (audited) Revenue Data library sales $ 12,439 $ 4,721 $ 34,905 $ 25,674 Participation surveys $ 4,368 $ (116) $ 10,006 $ 19,916 LiDAR $ 1,963 $ 1,321 $ 8,452 $ 3,886 Trango & other $ 336 $ 213 $ 1,229 $ 1,516 Total revenue $ 19,106 $ 6,139 $ 54,592 $ 50,992
Amortization of data libraries $ 6,779 $ 6,423 $ 21,536 $ 22,862 Net earnings $ 4,020 $ 5,305 $ 6,488 $ 7,719 Net earnings per share: basic and diluted $ 0.09 $ 0.12 $ 0.14 $ 0.18 Funds from operations(1) $ 13,860 $ 2,094 $ 35,017 $ 36,776 Funds from operations per share(1): basic $ 0.30 $ 0.33 $ 0.76 $ 0.84 diluted $ 0.30 $ 0.33 $ 0.75 $ 0.84 Free cash flow(1) $ 7,781 $ 7,048 $ 23,458 $ 11,988 Working capital $ 16,996 $ 3,845 $ 16,996 $ 3,845 Total assets $ 129,569 $ 108,426 $ 129,569 $ 108,426 Capital expenditures: Seismic data purchases $ - $ 1,295 $ 15,225 $ 1,295 Participation surveys $ 6,079 $ 8,149 $ 11,559 $ 24,788 Changes to work in progress $ 181 $ (4,183) $ 190 $ (8,436) Property & equipment additions $ 139 $ 225 $ 1,510 $ 574 Total capital expenditures $ 6,399 $ 5,486 $ 28,484 $ 18,221
Long-term debt (net of current maturities) $ 20,772 $ 11,203 $ 20,772 $ 11,203 Shareholders' equity $ 82,432 $ 77,507 $ 82,432 $ 77,507 Weighted average shares outstanding: basic 46,500,615 45,654,671 46,161,608 43,646,866 diluted 46,320,276 46,002,105 46,842,744 43,990,061 Shares outstanding at period end 46,559,778 45,774,816 46,559,778 45,774,816
(1) These non-GAAP financial measures are defined in the Financial Summary below.
Operational Highlights
Seismic library: 2D in net kilometres 239,822 239,288 239,822 239,288 3D in net square kilometres 9,442 6,522 9,442 6,522
FINANCIAL SUMMARY
The Company's continuous disclosure documents may provide discussion and analysis of "free cash flow", "funds from operations" and "funds from operations per share". These financial measures do not have a standard definition prescribed by generally accepted accounting principles in Canada and therefore they may not be comparable to similar measures disclosed by other companies. The Company has included these non-GAAP financial measures because they are used by management, investors, analysts and others as measures of the Company's financial performance. The Company's definition of free cash flow is cash available for debt servicing, discretionary capital expenditures and the payment of dividends, and is calculated as funds from operations less participation survey additions to the data library. The Company's definition for funds from operations is defined as cash flow from operations as prescribed by Canadian generally accepted accounting principles, but excluding the impact of changes in non-cash working capital. Funds from operations per share is defined as cash flow from operations divided by the weighted average number of shares outstanding for the period.
Overview
Net earnings for the year ended December 31, 2005 were $6.5 million ($0.14 per share diluted), compared to $7.7 million ($0.18 per share diluted) for 2004. Funds from operations for 2005 were $35.0 million ($0.75 per share diluted), compared to $36.8 million ($0.84 per share diluted) generated for the year ended December 31, 2004. These per share figures are based on the weighted average diluted shares outstanding of 46,842,744 for 2005, compared to 43,990,061 for 2004. On June 15, 2005 Pulse successfully completed the acquisition of a significant seismic data base which has increased the Company's 3D data library by 40%. The acquisition consists of approximately 2,500 net square kilometres of 3D seismic data and 500 net kilometres of 2D seismic data and is located in the south-central area of Alberta. This valuable addition is complementary to Pulse's existing database and is located in an area that has recently seen a significant increase in exploration activity by oil and gas companies. The purchase price of $15.2 million was principally financed by term debt through Pulse's existing debt provider. The effective date of the transaction was May 2, 2005.
Revenue
For the year ended December 31 (stated in thousands of dollars) (In 2004, the LiDAR segment includes results from May 26 to December 31.)
2005 2004 Business Segment % of Total % of Total % Revenue Revenue Revenue Revenue Change Seismic Data: Data library sales $ 34,905 63.9 $ 25,674 50.3 36.0 Participation surveys 10,006 18.3 19,916 39.1 (49.8) LiDAR 8,452 15.5 3,886 7.6 117.5 Trango 1,455 2.7 1,437 2.8 1.3 Corporate and other (226) (0.4) 79 0.2 (386.0) Total $ 54,592 100 $ 50,992 100 7.1
For the three months ended December 31 (stated in thousands of dollars)
2005 2004 Business Segment % of Total % of Total % Revenue Revenue Revenue Revenue Change Seismic Data: Data library sales $ 12,439 65.1 $ 8,520 44.6 46.0 Participation surveys 4,368 22.8 7,657 40.2 (43.0) LiDAR 1,963 10.2 2,059 10.8 (4.7) Trango 390 2.0 820 4.3 (52.4) Corporate and other (54) (0.1) 54 0.1 (200.0) Total $ 19,106 100 $ 19,110 100 (0.02)
Seismic Data Segment
The seismic data segment, which includes data library sales and participation survey revenues, contributed 82.2% of total revenue for the Company in 2005, and 87.9% of total revenue for the fourth quarter of 2005. In 2004, with the Terrapoint acquisition effective May 26, 2004, the seismic data segment contributed 89.4% of total revenue for the year ended December 31, 2004 and 84.8% of total revenue for the fourth quarter of 2004. For the year ended December 31, 2005, Pulse recorded total seismic revenue of $44.9 million compared to $45.6 million for 2004. Within the seismic data segment the Company generates two types of revenue: data library sales and participation survey revenue. While participation survey revenue increases revenue and earnings significantly in periods of high survey activity, participation surveys represent an investment in the seismic data library that initially draws down the capital resources of the Company. Data library sales generate immediate free cash flow through licenses of seismic data from the existing library of seismic data, which can occur many times without incurring further costs. Seismic data segment revenue for the year ended December 31, 2005 reflects an overall decrease of 1.5% from 2004, but includes a 36.0% increase in data library sales year-over-year, and a 46% increase in data library sales for the fourth quarter of 2005 compared to the same period in 2004. The primary reason for the small decrease in total seismic data segment revenue was that Pulse recorded $10.0 million of participation survey revenue in 2005, compared to $19.9 million of participation survey revenue in 2004. Even though participation surveys were reduced in 2005 the Company added substantially more 3D seismic data to the library in 2005 through the $15.2 million purchase of a significant data set in 2005. The 2004 period had a higher than normal level of participation surveys delivered, due to the late delivery of a program that had been scheduled to be delivered at the end of 2003.
LiDAR Segment
LiDAR revenue for the fourth quarter of 2005 decreased by 4.7% to $2.0 million compared to revenue for the fourth quarter of 2004 of $2.1 million, and reached a year-end total of $8.5 million in 2005. The 2004 year-end total was $3.9 million; however, this total does not reflect a full year of operations as the LiDAR business was acquired on May 26, 2004.
Trango Segment
Revenue for 2005 increased 1.3% to $1.5 million in 2005 from $1.4 million in 2004. For the fourth quarter of 2005 the revenue of $390,000 was a decrease of 52.4% from the $820,000 generated in the fourth quarter of 2004. In the fourth quarter of 2004 Trango was successful in securing several large contracts with clients in the United States. By the end of 2005 Trango was in the process of negotiating several significant contracts which were subsequently signed in early 2006.
Corporate and Other Segment
The corporate and other segment consists primarily of Pulse's corporate G&A costs, interest and items such as inter-company eliminations and foreign exchange gains and/or losses.
Data Library
Pulse acquires seismic data to grow its data library through two primary methods. The Company conducts participation surveys each year, and also purchases complementary seismic data when the opportunity arises to acquire the proprietary rights. During 2005, Pulse invested $26.8 million to acquire new seismic data. In the second quarter of 2005 the Company paid $15.2 million to purchase the proprietary rights to approximately 2,500 net square kilometres of 3D seismic data and 500 net kilometres of 2D seismic data, located in the south-central area of Alberta. Additionally, in the first half of 2005, the Company invested $5.5 million to acquire 244 net square kilometres of 3D data through two participation surveys in northern Alberta. In the fourth quarter of 2005 Pulse spent an additional $6.0 million to acquire 174 net square kilometres of 3D data through two participation surveys in west-central Alberta. In comparison, the Company spent $24.8 million on participation surveys in 2004. This amount included $8.4 million that was recorded at December 31, 2003 as work in progress relating to the participation survey programs completed in the first quarter of 2004, which was converted to data library additions in 2004 with the delivery of the data in February and March 2004.
Liquidity, Capital Resources and Capital Requirements
At December 31, 2005 the working capital position of Pulse, including the current portion of long-term debt of $6.1 million, was $17.0 million, compared to $3.8 million at December 31, 2004. The year-over-year working capital position has improved by 342% as a result of increased accounts receivable relating to the high level of seismic data library sales achieved late in the year and a significant cash balance achieved through a successful seismic data library sales year. Subsequent to year end, the Company collected approximately $11 million of the December 31, 2005 accounts receivable balance. A significantly lower amount of cash was invested into participation surveys than in 2004, leaving the capital available as current working capital as opposed to converting it into a non-current data library asset. With the continued trend of very strong seismic data sales levels, Pulse management expects that its funds from operations will be sufficient to finance operations, service debt, and pay dividends and budgeted capital expenditures through 2006. The seismic data library is continually growing through the acquisition of new seismic data - principally 3D. The ongoing growth in the Company's seismic data library continues to position Pulse as a leading provider of valuable seismic data to industry participants well into the future. Historical data sales analysis shows that most seismic data retains its value for many years. Combined with the technological advancements in reprocessing that have been made in recent years, the Company's clients are able to enhance the quality of older data in the library. The business of Terrapoint is growing and significant market opportunities have been identified. Management is focusing on new ways to tap into a greater share of this growth industry. Although quarterly results can show significant swings in working capital because of participation surveys, Pulse remains liquid. The capital-intensive nature of the seismic business is such that working capital deficiency balances can accumulate during the busy participation survey season, only to be reversed upon delivery of the seismic data to survey participants. In order to limit risk in participation surveys, the Company does not generally proceed with a participation survey without obtaining minimum pre-funding commitments from clients. Because Pulse's largest expense in any given period in non-cash amortization expense, funds from operations are usually much higher than net earnings.
PULSE DATA INC. Consolidated Balance Sheets
December 31, 2005 and 2004 (In thousands of dollars)
2005 2004
Assets
Current assets: Cash and cash equivalents $ 11,909 $ 3,827 Accounts receivable 20,594 12,832 Prepaid expenses 316 234 Work in progress 993 693 33,812 17,586
Long-term receivable 800 - Data libraries 80,256 75,008 Participation surveys in progress 192 2 Property and equipment 13,859 15,042 Investments 432 667 Deferred charges 218 121
$129,569 $108,426
Liabilities and Shareholders' Equity
Current liabilities: Accounts payable and accrued liabilities $ 6,748 $ 4,466 Deferred revenue 4,000 3,613 Current portion of long-term debt 6,068 5,662 16,816 13,741
Long-term debt 20,772 11,203 Future income taxes 9,549 5,975
Shareholders' equity: Share capital 51,808 50,531 Contributed surplus 1,079 449 Retained earnings 29,545 26,527 82,432 77,507 Commitments $129,569 $108,426
PULSE DATA INC. Consolidated Statements of Earnings and Retained Earnings
Years ended December 31, 2005 and 2004 (In thousands of dollars, except per share data) 2005 2004
Revenue $ 54,592 $ 50,992 Operating expenses: Amortization of data libraries 21,536 22,862 Operating 11,085 6,583 Depreciation and amortization 2,693 1,615 35,314 31,220
Gross margin 19,278 19,932
General and administrative expenses 6,688 4,215 Research and development expenses 1,169 1,256 Interest: Long-term debt 1,300 1,039 Other (290) 242 1,010 1,281
Earnings before income taxes 10,411 13,180
Income taxes: Current 349 950 Future 3,574 4,511 3,923 5,461
Net earnings $ 6,488 $ 7,719
Retained earnings, beginning of year $ 26,527 $ 21,027
Dividends paid (3,470) (2,219) Retained earnings, end of year $ 29,545 $ 26,527
Earnings per share, basic and diluted $ 0.14 $ 0.18
PULSE DATA INC. Consolidated Statements of Cash Flows
Years ended December 31, 2005 and 2004 (In thousands of dollars)
2005 2004 Cash provided by (used in):
Operations: Net earnings $ 6,488 $ 7,719 Items not involving cash: Amortization of data libraries 21,536 22,862 Depreciation and amortization 2,693 1,615 Unrealized gain on foreign exchange (107) (276) Future income taxes 3,574 4,511 Stock-based compensation 813 425 Other 20 (80) Funds from operations 35,017 36,776
Net change in non-cash working capital items related to operations (4,157) (5,989) Decrease in non-current deferred revenue - (324) 30,860 30,463 Financing: Long-term debt 15,439 - Repayment of long-term debt (5,464) (4,624) Issue of share capital 1,094 810 Dividends paid (3,470) (2,219) Increase in deferred charges (145) (44) 7,454 (6,077) Investing: Additions to data libraries through participation surveys (11,559) (24,788) Seismic data purchases (15,225) (1,295) (Increase) decrease in participation surveys in progress (190) 8,436 Decrease in investments 235 216 Additions to property and equipment (1,510) (574) Business acquisition - (2,142) Net change in non-cash working capital items related to investing (1,983) (9,430) (30,232) (29,577)
Increase (decrease) in cash position 8,082 (5,191)
Cash and cash equivalents, beginning of year 3,827 9,018
Cash and cash equivalents, end of year $ 11,909 $ 3,827
During the year the Corporation paid interest of $1,284,000 (2004 - $1,350,000) and received interest of $137,000 (2004 - $61,000). During the year the Corporation paid income taxes of $177,000 (2004 - $1,137,000)
Year ended Seismic Corporate December 31, 2005 Data LiDAR Trango and Other Total Revenue Data library sales $ 34,905 $ - $ - $ - $ 34,905 Participation surveys 10,006 - - - 10,006 LiDAR - 8,452 - - 8,452 Trango - - 1,455 - 1,455 Corporate and other - - - (226) (226) Total revenue 44,911 8,452 1,455 (226) 54,592 Amortization 21,360 176 - - 21,536 Segment profit (loss), before undernoted 23,551 8,276 1,455 (226) 33,056
Operating expenses 3,399 6,306 1,588 (208) 11,085 General and administrative - 1,850 117 4,721 6,688 Depreciation - 2,325 78 290 2,693 Research and development - 1,169 - - 1,169 Interest expense - 3 - 1,007 1,010 Earnings (loss) before income taxes $ 20,152 $ (3,377) $ (328) $ (6,036) $ 10,411
Total assets $109,562 $ 17,006 $ 1,437 $ 1,564 $ 129,569
Capital expenditures $ 26,974 $ 567 $ 16 $ 927 $ 28,484
Year ended Seismic Corporate December 31, 2004 Data LiDAR Trango and Other Total Revenue Data library sales $ 25,674 $ - $ - $ - $ 25,674 Participation surveys 19,916 - - - 19,916 LiDAR - 3,886 - - 3,886 Trango - - 1,437 - 1,437 Corporate and other - - - 79 79 Total revenue 45,590 3,886 1,437 79 50,992 Amortization 22,760 102 - - 22,862 Segment profit (loss), before undernoted 22,830 3,784 1,437 79 28,130
Operating expenses 2,720 2,707 1,357 (201) 6,583 General and administrative - 895 160 3,160 4,215 Depreciation - 1,299 103 213 1,615 Research and development - 1,256 - - 1,256 Interest expense - 17 - 1,264 1,281 Earnings (loss) before income taxes $ 20,110 $ (2,390) $ (183) $ (4,357) $ 13,180
Total assets $ 88,418 $ 16,393 $ 1,358 $ 2,257 $108,426
Capital expenditures $ 17,647 $ 224 $ 17 $ 333 $ 18,221
OUTLOOK
Activity levels in the oil and gas industry have been robust over the last few years due to the strong commodity pricing environment. This high level of activity is expected to continue through 2006, and consequently the demand for seismic data, which plays an integral role in the early stages of exploration and development drilling activity, will continue to remain healthy. In addition, with further industry exploration and development activity targeted for northern Alberta and British Columbia, the demand for Pulse's participation survey programs is also expected to be strong. The LiDAR business segment did not meet financial and operating expectations in 2005 due primarily to the low reliability and productivity from the high-range LiDAR systems. In the first quarter of 2006, corrective steps have been taken through new sales and marketing initiatives and new product development which are expected to significantly improve the reliability and capacity of the high range systems, and in turn improve the financial results of this business segment. In 2005, Trango made significant inroads into the United States marketplace, and through its growing reputation for providing quality exploration data management products and services, has increased its market share. Trango has provided a quality product to Pulse that efficiently manages the Company's seismic data library requirements; however, it remains a non- core commercial business of Pulse, and the Company has initiated a program to review a potential restructuring or monetization of Trango in 2006. By focusing on its core seismic business, Pulse has significantly strengthened its balance sheet in 2005 through the generation of a record level of free cash flow. With confidence that free cash flow levels will continue to be generated by the Company's quality asset base, the Company announced on February 14, 2006 a 50% increase in the annual dividend rate to $0.15 per common share.